Hain Celestial to Outperform

We now expect The Hain Celestial Group Inc. (HAIN) to Outperform with a target price of $26.00. Earlier we had a Neutral rating on the stock.

A leader in natural food and personal care products categories with an extensive portfolio of well-known brands, Hain Celestial offers investors one of the strongest growth profiles in the industry. The stock is poised to surge once the economy rebounds and demand for healthier and natural food improves.

Acquisitions have been a key part of the company’s strategy to increase its market share. Acquisitions have not only expanded the company’s geographical presence but have also provided opportunities to cross-sell products in the U.S., Canada and Europe. Hain Celestial leverages its healthy balance sheet to make strategic acquisitions.

To name a few of the company’s recent acquisitions, Hain Celestial added World Gourmet Marketing including its Sensible Portions brand of Garden Veggie Straws, Pita Bites and other snack products. The company also acquired Churchill Food Products Limited that manufactures and distributes food-to-go products in the United Kingdom. The company purchased The Greek Gods brand as well.

Complementing its acquisitive streak, the company has also undertaken a number of operational initiatives to improve performance and to put itself on the growth trajectory. Hain Celestial’s Stock Keeping Unit (“SKU”) rationalization program has helped eliminate SKUs based on lower sales volume or weak margins. Management focuses on improving profitability through new product introductions and cutting costs.

Hain Celestial holds a Zacks #1 Rank, which translates into a short-term ‘Strong Buy’ rating, primarily owing to its better-than-expected, fourth-quarter 2010 results.

The quarterly earnings of 26 cents a share outdid the Zacks Consensus Estimate of 24 cents, and surged 23.8% from 21 cents delivered in the prior-year quarter. Hain Celestial now expects fiscal year 2011 earnings in the range of $1.24 to $1.31 per share.

The recent economic turmoil has adversely affected consumer demand and led to destocking at major distributors and retailers, exerting pressure on sales and margins. However, Hain Celestial’s strategic investments and sustained effort, to contain costs, increase productivity, and enhance cash flows and margins, have enabled it to weather the recent downturn.

HAIN CELESTIAL (HAIN): Free Stock Analysis Report

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